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There’s Nothing Special About Your Strategy

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I support a particular hospital charity that each year or so runs a home lottery and every year I enter. To date I have won a digital camera, an iPod, an Apple TV, a tonne of chocolate, wine (brilliant for a non-drinker but good for presents) and a host of other goodies. In fact I have never had a time when I have entered and not won something. Whilst my expectancy is not quite positive it’s not bad. If I were a news agency that sold lottery tickets and I had this many winning entries bought via my store people would be clambering over me thinking there was something special about my store.

One of the things we ignore in life is that we are subject to the same harsh statistics as everyone else – we have what I call the myth of individual specialness. Our basic narcissism leads us to believe that the laws that apply to the universe don’t really apply to us, as a result we spend a lot of time fooling ourselves into think there is something special or magical about what we do.

My capacity to win this particular lottery has nothing to do with me other than the fact that I enter, I am simply subject to the laws of large numbers as is everyone else. If you get enough people doing the same thing over a long period time then the probable drifts into the realm of the inevitable. It is no wonder some people win the lottery twice.

But because we are such poor natural statisticians this seems like magic to us and we ascribe some special quality to ourselves and this is apparently a well-known phenomenon in both lottery winners and those who have inherited wealth. They believe that something divine about themselves means that they were meant to win – they cannot accept that it was blind luck. My wife has a friend who received a very large inheritance from her parents, she has now divorced herself from all her friends of many decades because she believes that there is something superior about herself other than being the lucky product of the sperm sprint derby that we all undergo. Sometimes you land in the right spot and sometimes you don’t.

The central issue here is that even in trading we are subject to the ruthlessness of statistics and this ruthlessness is often at odds with our own emotional endurance. For example if you have a system with a positive expectancy this means that on average and over time your system will make money. But note there are two presumptive phrases involved in this definition – on average and over time.

You need to have the resilience to ride out the times when the system is not making money. When traders first encounter the notion of expectancy they assume that is means that every trade they take will make $X and are surprised when this does not happen. All trading systems will experience runs of losses, this is the natural order of things and you can experiment with this for yourself by looking at a coin toss simulator. If you click here you can see how streaks of either heads or tails form – this is a good example of what can happen in trading systems.

Despite trading being a basic exercise in statistics at its core it is an exercise in resilience because we have to find ways of dealing with brutality of statistics and even when we know our system is sound it is still hard to take a continual series of losses. Inevitably we come back to the notion of courage as a central tenet in the success of any trader.

Author: Chris Tate

Article reproduced with kind permission of: Tradinggame.com.au

This article is concluded with the 3 quotes below:

“Every time you have a hunch that the market will reverse, jot it down on paper. After 30 attempts, look back at how accurate your prediction is. You may be surprised by your results.” – Rayner Teo

“Defeats in trading are not really defeats, anyway — they are more like trial balloons we keep sending up, knowing in advance that a certain number of them are going to get shot down. Therefore, trading is really a process of two steps forward and one step back. The one step back part will always seem like a defeat, will always feel like a defeat, but is not a defeat – simply part of the process.” – Andy Jordan

“A large population of traders consider themselves to be much more effective than they really are.”- Chris Tate

What I observed in myself and others from this is consistently elevated ambivalence re: all signals, accompanied by reduced staying power / emotional stability / resiliency. Along side this comes reduced vibrancy and ‘health’... the body keeps the score. My solution was to gut it out until I could last all day and all night taking every signal. But ultimately I only got real change when I also added ‘love and acceptance’ to the things I had to acknowledge about myself and my tendencies and biases.

....

Chris quotes Chris

“A large population of traders consider themselves to be much more effective than they really are.”- Chris Tate

:haha: Wtf are you talkin about chris?

A large percentage of traders consider themselves to be much more effective than they really are.

ok... but...

A large percentage of traders consider themselves to be much less effective than they really are.

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Have you written an article titled something like “There is Nothing Special About You” ?

Back in the day I made it a point to share some face time and screen time (or floor time) with some of the best (and best known) traders and managers of that era... and - even though their performance and income was anything but ‘ordinary/loser trading’ - in all almost cases these guys experienced themselves and carried themselves as quite ordinary.

... and paradoxically, almost all of them acknowledged living under the influence of ‘dopamine’, 'testosterone' , etc etc (btw there were exceptions to this)

...Historically, my best trading runs are not accompanied by ‘positivity’ or ‘confidence’... or content that I am special... Actually, it’s my experience that inflating into ‘special’ is a pretty good way to end a discretionary run...rules, being present and aware, risk/loss control, etc. drop below the required threshold of importance...

etc

etc

(:haha: ... please end the article with quotes from

1 Chris Hate

2 Mitsubishi

3 CrazyCzarina

and

4 Chris Tate

)

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Therefore, trading is really a process of two steps forward and one step back. The one step back part will always seem like a defeat, will always feel like a defeat, but is not a defeat – simply part of the process.” – Andy Jordan

LOL

I'd kill for 2 steps forward one step back

I'm typically making new equity highs less than 20 percent of the time, 80% of the time I'm either losing money, or making back the gains that I lost earlier

I am without the best trader that Ive ever met, with triple digit annual returns with very low drawdowns.

the two forward one back thing is a good analogy, but very far wide of the mark

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There’s another angle on why “There’s Nothing Special About Your Strategy” -

“When traders first encounter the notion of expectancy” - or stated another way, when beginning traders attempt to impose a layer of genuine “statistics” onto whatever foundation of unconscious ‘magical’ structure they bring to the arena - they immediately revert to looking to ‘systems’ and methods to mitigate the ‘chaos’ ...

Rather than dig into the details of that - fk, let’s get to the point...

It is deep and intense involvement that makes real growth happen, not methods! Method is secondary. In the presence of deep and intense involvement even a wrong principle, a wrong method, and/or a wrong teacher can lead you to the ‘real’ where you can then find the truly correct practices and methods for your self

...

TL is such a sharing caring place ... where we discuss things openly and at any depth needed...

Posts

mits,
well we don't need to worry about this* with you, do we?
you need some boundaries dood. jk
*https://www.wakingtimes.com/2018/08/13/george-orwell-warned-us-of-the-most-dangerous-type-of-censorship/
...
must disagree again... keeping billions herded is not that difficult... herds for the most part tend to herd themselves with occasional help from fences and shepherds... to make it even easier - keep them malnourished on empty foods... keep them serially sick and weak from toxins and pharm ... keep them doped up on synthetic pain and symptom suppressor meds ... maintain relentless attacks on the functional aspects of cultures, while building a culture that features only operating as physical beings with no contact with 'spirit', with the consequent lack of feeling culpable for their world ... keep them polarized and divided and in 'broken' relationships ... keep their brains saturated 24 7 with a fake orthodoxy, a global distributed script, body of consensus ideas with the unspoken hint that all right-thinking people will accept it without question... censor the outspoken deviants as harshly as needed... track every move the relatively small sample of profiled deviants make ... have the dogs ready to round them up and pushed back onto the plantation, or into retraining prisons, or killed...

USDJPY: Sees Further Recovery Higher
USDJPY: The pair looks to extend further recovery higher as more strength is likely. On the downside, support lies at the 110.50 level where a break if seen will aim at the 110.00 level. A cut through here will turn focus to the 109.50 level and possibly lower towards the 109.00 level. On the upside, resistance resides at the 111.50 level. Further out, we envisage a possible move towards the 112.00 level. Further out, resistance resides at the 112.50 level with a turn above here aiming at the 113.00 level. On the whole, USDJPY faces further recovery pressure.

European Fixed Income Outlook: German 10-year Bund yields jumped higher from the off and as of 06:19 GMT, are up 1.8 bp at 0.326%, underperforming Treasuries and JGBs, which showed rates rising 1.6 bp and 1.0 bp respectively. Stronger than expected growth numbers at the start of the session added pressure on Bunds, after core yields already started to back up again as stock markets stabilized and Turkey jitters receded somewhat. Japanese markets bounced back overnight and European stock futures are moving higher alongside US futures. Bundesbank’s Wuermeling suggested one should not “over dramatize” the risk of Turkey contagion, adding that ECB didn’t see the need for a risk meeting so far. As long as there is not a further dramatic escalation, the turbulence is not expected to derail ECB’s course towards a phasing out of QE. Already released German July HICP was confirmed at 2.1% y/y. Still to come are German ZEW confidence, the 2nd reading of Q2 Eurozone GDP and UK labour market data.

FX Update: Safe haven positioning were unwound some today, which saw the Dollar and Yen traded softer against most other currencies after Ankara managed to halt the rout of the Lira, which in turn brought a reprieve in still-fragile global markets. Most stock markets found a footing in Asia, and USA500 futures are showing a 0.3% gain, reversing most of yesterday’s regular-session’s losses, though Chinese markets were an exception, declining after a batch of economic data showed the economy to have hit a rough patch, while investment growth was shown to have reached a record low. EURUSD settled around the 1.1400 mark, above yesterday’s 13-month low at 1.1365. USDJPY recouped back toward the 111.0 level after posting a seven-week low at 110.11 yesterday. PBoC set the reference rate for USDCNY at 6.8695, versus 6.8629 yesterday. China’s statistics bureau said that the weaker Yuan, which has declined the most against the Dollar since April on record (in the era of the prevailing regime), and perhaps aiming to counter the wrath of President Trump, was a reflection of the Fed’s tightening cycle. AUDUSD firmed above 0.7770, finding a footing after 3 consecutive days of declines. Australia data showing business confidence rising provided the Aussie a supporting influence.

Charts of the Day

Main Macro Events Today
UK Average Earnings Index – Expectations – Average Household Earnings expected to come in with 2.5% y/y and 2.7% y/y growth in both the including- and ex-bonus figures, which would match the respective growth rates that were seen in the month prior.
UK Unemployment Rate – Expectations – The labour report expected to show unemployment holding unchanged at 4.2% in June.
Eurozone GDP – Expectations – Eurozone Q2 GDP is likely to be confirmed at 0.3% q/q.
German ZEW Economic Sentiment – Expectations – A slight improvement is anticipated in the headline number to -24.0, from -24.7 in the previous month.
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Andria Pichidi
Market Analyst
HotForex

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